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World Bank backs China's recovery

THE World Bank expects China's economy to recover mid this year and help Asia to counter the "Great Recession" that is dragging growth in the region's developing economies to the weakest level in more than a decade.

The World Bank said today that a recovery in China is likely to begin this year and take full hold in 2010, potentially contributing to the region's stabilization, and perhaps recovery.

Developing East Asia, which excludes markets like Japan, Hong Kong, Taiwan, South Korea, Singapore and the Indian subcontinent, will expand 5.3 percent this year, less than the December estimate of 6.7 percent, the Washington-based international institution said in its semi-annual report today. Growth was 8 percent last year, it said.

"As countries in the East Asia and Pacific region prepare themselves for an expected surge in joblessness resulting from the global slowdown, a ray of hope may be emerging with signs of China's economy bottoming out by mid-2009," said the World Bank.

"China remains a bright spot in the region and the global economy amid signs that economic activity may be bottoming out," the World Bank said.

"Unless there is a further intensification of the contraction in global demand, or global financial tensions flare up again, growth in China will pick up in the second half of the year, partly offsetting the weak first half," the World Bank said.

China's March purchasing managers' index stepped into the above-50 expansionary territory for the first time in six months, indicating that China's economy may be bottoming out.

The country has announced a massive 4-trillion-yuan (US$586 billion) stimulus package to revive economic growth, scrapped lending quotas to thaw liquidity and increased tax rebates to arrest a slump in exports.

The World Bank said earlier in March that it had revised its forecast on China's economic growth this year from the December estimate of 7.5 percent to 6.5 percent.

The Chinese government is targeting a "challenging but manageable" 8 percent growth this year.

China is the rare major economy that has fended off recession during the "Great Recession" as it is named by the International Monetary Fund.

The World Bank and IMF both predicted a global economic decrease this year, the first such drop since World War II.

With China still heavily reliant on exports to world markets that continue to contract, the World Bank warns that a truly sustainable recovery in the East Asia and Pacific region ultimately depends on developments in the advanced economies.

Still, developing East Asian economies will grow faster than other emerging-market regions such as Latin America, the World Bank said.


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